On the header

There’s a gazillion little ad tech companies out there, as you can see in the well-traveled chart called the Display Lumascape on the right. Conventional (and probably correct) wisdom is that eventually many of them will get snapped up by bigger fish, whether that’s giants like Google, Oracle, and Facebook or rivals that just did a better job.

Since that process has happened a little more slowly than many people expected, though, a few of those fish are getting pretty big. One of them is Rocket Fuel, a Redwood City (Calif.)-based startup that despite its name has flown under the radar of the general public. While it started out as an ad network, it might be better seen today as a so-called demand-side platform, or DSP. It buys ad space for marketers and uses its rocket-science technology to target ads precisely in real time to the most receptive prospects, a process that goes by the industry shorthand “programmatic buying.”

Today, Rocket Fuel is announcing with unusual candor for a startup that its gross revenues rose 238% last year to $107 million. Notice I said gross revenues; a good chunk of that goes back to publishers from which it bought ad inventory. The company won’t reveal net revenues.

But the growth is real. And that includes growth in customers, nearly a doubling of new advertisers. On their behalf, Rocket Fuel’s system deals with more than 26 billion ad impressions a day. Not least, the company has more than doubled its staff, to 289 employees, including a new chief marketing officer and a couple of VPs.

CEO George John says the company isn’t profitable yet, though he says it’s close. “The playbook is to invest,” he says, so plans are not for near-term profits.

You might wonder, as I did, whether revealing revenues is an indication that the company aims to go public soon. Actually, it has been just as forthcoming previously, and John won’t say what his plans are.

But given that it had made noises back in 2011 about an IPO in 2012, instead raising a huge $50 million round last June, it’s not out of the realm of possibility this year, market gods willing. Or, to mix a metaphor, it might continue to swim around the Lumascape and try to figure out whether to eat or be eaten.

It’s that time of year: time to reflect on the past year, time to get wasted and watch a glass ball smash into the ground, time for people like me who foolishly offered predictions for the past year to face the music. So here’s how I did on my 2012 predictions:

* Image ads finally find a home on the Web:Half-right. YouTube proved there’s a real market for TV-like video ads if you give viewers the choice to view them or not, as its revenues were expected to hit $3.6 billion in 2012, according to Citibank. But Facebook’s struggles to attract brand advertising despite a TV-scale audience, while partially successful, show that no one has yet come up with brand ad formats that work consistently and at large scale online. Or at least brands, which still spend most of their money on TV ads, don’t believe it yet. And they write the checks.

Facebook has Sponsored Stories. Twitter has Promoted Tweets. Buzzfeed has Promoted Posts. They’re all based on social gestures and activities, each targeted to people, whether friends or birds of a feather, who might share similar interests. Now, a company has come up with a new way of targeting people using one of the most common social gestures of our time: the hashtag.

If you’re bothering to read this, you probably already know hashtags are those short subject labels, starting with a # or hash sign, that describe the topic a tweet or other shared item is about. They didn’t start with Twitter, but they became popular thanks to their common use in tweets. That use has spread to other social networks, from Pinterest to Instagram (though not very often on Facebook, for some reason).

Today, social ad firm RadiumOneannounced it’s making hashtag targeting available to advertisers so they can reach like-minded consumers in real-time across the Web based on the hashtags they’re using. So, for example, says RadiumOne founder and CEO Gurbaksh Chahal, Nike can reach consumers who use the hashtag #nike, or #olympics, or #fitness with ads for running shoes. Or McDonald’s could target people who tag their tweet or Instagram photo #burgers or even #hungry. …

The key number: 36%. That’s the rate at which advertising revenues grew. And it’s noticeably higher than ad sales growth in the second quarter, which had flagged at 28%. Excluding the impact of foreign currency changes, ad sales would have risen 43% in the third quarter.

Mobile revenues, a key metric for a company that until recently had zero mobile ad revenues and offered little of note to its mobile users, were 14% of the total $1.09 billion in ad sales.

The other key number: 9%. That’s how much shares are rising in after-hours trading. Shares of FB rose a little less than 1%, to $19.50, in trading today. That’s still only a little over half of the IPO price.

Facebook still faces many challenges, such as the need to provide a better mobile experience for users and advertisers. And thanks to rising expenses, including stock compensation and related costs–up 64% from a year ago–it’s actually losing money on a GAAP basis. But if advertising is returning, whether it’s from more interest in its social and mobile ads, in the Facebook ad exchange that’s getting a lot of attention, or even in the new Gifts e-commerce service, that’s good news.

We’ll hear more from CEO Mark Zuckerberg shortly when Facebook conducts its analyst earnings call at 2 p.m. Pacific. I’ll blog the highlights here, but you can also listen to the livestream.

The call begins. Zuckerberg will talk about the vision and strategy of the company–make the world more connected, etc. Three pillars to the strategy:

1) Build the best mobile product. This is the most misunderstood pillar. Mobile allows us to reach way more people, people spend more time on mobile devices, and monetization should be even better than on the desktop.

2) Improve the Facebook platform.

3) Strong monetization engine. On mobile, ads will be more like TV–more integrated into the core product experience, rather than on the side. We’re starting to see better ad products for people and better results for advertisers.

I want to dispose of this notion that we can’t make money on mobile. Until recently, Facebook didn’t even try. …

It’s a quarter that probably doesn’t matter much, but Yahoo eked out a small rise in profits on slightly higher sales in its third quarter.

It’s the first full quarter since CEO Marissa Mayer joined the company, and while investors are more concerned about the future, so far they like what they see in the last quarter. Shares are rising about 3% in after-hours trading following a decline of less than 1% today, to $15.77 a share.

Yahoo’s third-quarter revenues rose 2% to $1.09 billion, earning a 35-cent profit per share. Operating income came in at $150 million. Wall Street analysts were expecting net revenues of $1.08 billion, operating income of $180 million, and GAAP earnings per share of 26 cents. Including a onetime gain from the sale of shares of China’s Alibaba, Yahoo’s EPS was $2.64.

In particular, display ad revenue, Yahoo’s mainstay business, came in flat from a year ago at $452 million, but search ad revenues via its multi-year deal with Microsoft were better than expected, up 11% to $414 million.

…

And we’re underway on the analyst call with Mayer:

Mayer says she’s thrilled to be hear, naturally. She says she has been having a lot of fun. Why did I come to Yahoo? This job is tailor-made for me. Search, mobile, ads, home page, etc.–all things I built my career on.
She’ll talk about priorities and vision–great! First she addresses the people problem–that is, all the ones who have been leaving in droves for years. She says she has instituted new goals, metrics, etc. for people. True cultural change can’t be bought. The vast majority of what we’ve done hasn’t cost much, she says. …

Reid Hoffman is one of the most prolific angel investors in tech startups from Facebook and Zynga to Airbnb and Zipcar. It’s a talent he transferred to more traditional venture capital in 2009 when he joined Greylock Partners. He’s also a cofounder and executive chairman of LinkedIn.

In a “fireside chat” at the TechCrunch Disrupt conference in San Francisco today with TechCrunch founder Mike Arrington, who has since joined the VC world as well with his own CrunchFund, Hoffman proffered comments on everything from Facebook’s struggles to Twitter’s battles with developers. Here, paraphrased at times, is what he had to say:

Q: You are exceptionally wealthy. What changes?

A: There is a bunch of weird things. I had had a long-term plan to be affiliated with universities, like teaching. Overnight all those changed to donor relationships. Also, I would never have imagined I would fly in a private plane by myself, and now I have. It has its advantages.

A: I’m a big believer in Facebook’s long-term position. The real question is how it plays out over the next year or so. People’s hand-wringing about not making money on mobile is an innovation problem that is not that hard to solve.
Q: Did Facebook screw up its IPO or was it inevitable it played out that way?

A: In some ways, it was inevitable. You had unprecedented demand, and you couldn’t know NASDAQ servers would go down. We at LinkedIn were criticized for leaving too much money on the table. …